Cryptocurrency is an ever evolving and complex asset class, and understanding the metrics surrounding it is essential for any investor. One such metric is the fully diluted market cap in crypto, which is a calculation of the total value of a cryptocurrency based on its current circulating supply, as well as any potential additional tokens that could be issued later. In this blog article,we’ll explain the fully diluted market cap in crypto, how it’s calculated, and why it’s important for crypto investors.
Market Capitalization, or “market cap” , is an essential indicator of the size and value of a crypto currency. Market cap is an important metric because it helps investors easily compare the relative size of different crypto currencies. Generally, coins with a higher market cap are considered more established and valuable than those with a lower market cap. Market cap can also be used as a gauge of investor sentiment. Generally, when a coin’s market cap rises, it is a sign that investors are bullish on the coin, and when the market cap falls, it is a sign that investors are bearish on the coin. It is important to note that market cap should not be used as the sole metric for assessing the value of a cryptocurrency. A pump-and-dump scheme can artificially inflate a coin’s market cap, and other factors, such as its use case and technology, should be considered when assessing a coin’s actual value.
The market cap is the most basic calculation for understanding a cryptocurrency’s market capitalization. Market cap is calculated by multiplying a cryptocurrency’s current circulating supply by its current price. This figure represents the total value of the coins currently in circulation.
Fully Diluted Market Cap (FDV) is the total value of a cryptocurrency, considering all of the total shares that are currently outstanding as well as any potential additional shares that could be issued in the future. It is calculated by multiplying the total number of shares by the current market price of each share. This gives investors a better idea of the total market value of a cryptocurrency than simply looking at the current market cap.
For example, let’s say a cryptocurrency has a current market cap of $100 million. This means that the total value of all the outstanding shares is currently valued at $100 million. However, if the cryptocurrency has options or warrants that could be exercised in the future, then the fully diluted market cap would consider the potential additional shares that could be issued. This could increase the total market value of the cryptocurrency significantly.
A cryptocurrency's fully diluted market cap is calculated by taking the coin's current market cap and adding the potential value of any additional tokens that could be released in to the market. For example, if a coin has a current market cap of $100 million, and there is potential for an additional 10 million tokens to be issued in to the market, the FDV would be $110 million.
Investors in the crypto space should use the fully diluted market cap as part of their portfolio planning or trading strategies. The fully diluted market cap is a crucial metric for investors to consider as it shows the effect of all potential future dilutions.The fully diluted market cap considers any cryptocurrency's circulating, total,and maximum supply. This means that it considers all potential future tokens that could be created, such as those from future airdrops, token sales, or other dilution means. This metric gives investors a more accurate view of any cryptocurrency's total market cap and provides them with a more comprehensive understanding of the asset. It allows investors to better assess their investment's potential dilution and plan their portfolio accordingly.
Two significant factors distinguish FDV from the market cap: Accuracy and inflationary effect. The market cap provides a reasonably accurate idea of the present worth of a coin. The FDV does not give a truly accurate picture of the future worth of the coin; since it can only be projected using current values, it does not consider the crypto’s future growth and market adoption. Another drawback of the FDV metric is that it doesn’t factor in the inflationary effects of the coin’s supply on its price. If a coin’s future supply exceeds market demand, its price and value will fall. This is one of the reasons fully diluted market cap should only be used as a rough estimate of a coin’s future value not as a definitive metric.
In addition to a fully diluted market cap, several other calculations are essential for crypto investors. To name a few;
· Total supply, which is the total number of coins in circulation.
· Circulating supply is the number of coins currently circulating in the market.
· Maximum supply is the maximum number of coins that can ever be issued.
Considering all of this information, investors can make more informed decisions and create a well-prepared portfolio for potential dilution.
**At NeoNomad, we do not provide any advice or recommendations regarding cryptocurrency investments. All content on our website and articles is purely opinion and should not be taken as investment advice. We strongly advise all users to conduct their own research and due diligence before making any investment decisions.
.png)
.png)
.png)